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Saudi Arabia’s $ 100 billion plan to become the largest shale gas producer outside the United States

LONDON: Saudi Aramco’s award of $ 10 billion in contracts on its giant Jafurah project has finally kicked off to develop what is believed to be the world’s largest shale gas field outside the United States.
After battling with U.S. shale oil producers for market share over the past decade, the Kingdom is now embracing the low-cost advanced techniques of its hydraulic fracturing rivals and is expected to spend up to $ 100 billion. dollars for Jafurah to rapidly increase its domestic gas production.
The Kingdom is estimated to have the fifth largest shale gas reserves in the world.
Saudi Energy Minister Prince Abdulaziz bin Salman said earlier that the Jafurah gas field would place the Kingdom third in the world for natural gas production by 2030.
But does Saudi Arabia really have the potential to replicate the meteoric success of U.S. shale gas development?
Saudi Aramco CEO Amin Nasser certainly thinks so. Announcing the contracts this week, he said: “This is a breakthrough that few outside the Kingdom believed possible and which has positive implications for energy security, economic development and climate protection.”
Production is expected to start within the next three years. The field will provide cleaner natural gas for domestic use in the Kingdom, as well as raw materials for petrochemical production and, most importantly, low carbon hydrogen.
Jafurah is expected to contribute to Saudi Arabia’s goal of producing half of its electricity from gas and the other half from renewables as it pursues its goal of net zero in 2060. Indeed, Jafurah alone is expected to replace up to 500,000 barrels of oil per day that would otherwise be used for domestic consumption.
All of this serves the Kingdom’s Vision 2030 program goals to diversify the crude oil economy and sharply reduce its carbon footprint, even though the program will allow the Kingdom to increase its crude exports.
But it was believed that hydraulic fracturing in Saudi Arabia would cost more than in the United States, not least because the Kingdom is not known for its abundance of natural water, an essential part of the hydraulic fracturing process.
The fracking process involves pumping water, sand, and chemicals into the fields at high pressure, which fractures the shale rock and allows hydrocarbons to escape.
“We were able to reduce drilling costs by 70% and stimulus costs by 90% from the 2014 baseline cost, while increasing the productivity of the well by six times compared to the start of the program,” Nasser said on Monday. .
Aramco plans to use seawater for hydraulic fracturing in Jafurah. Earlier this year, the company also issued a tender for a field water desalination plant. Desalinated water is used in gas processing plants. An earlier bidding process was abruptly canceled last year, and the current bidding process has reduced the capacity of the desalination plant by about 20%.
However, the former executive vice president of Aramco, Sadad Husseini, insists that the “water problem” is a red herring.
He told Arab News: “The water problem was solved years ago. We have aquifers that contain salt water, and the Saudi oil industry has long used this water for drilling. “
Husseini also rejected cost comparisons with the US shale industry.
He said: “The cost of hydraulic fracturing depends on the depth of the reservoir. In the United States, they work with shallower reservoirs, about 3,000 to 4,000 feet deep, which makes hydraulic fracturing less expensive. In Saudi Arabia, the reservoirs will be 9,000 to 10,000 feet deep. It’s technically more difficult, but unlike the United States, these deep wells not only produce gas, they also produce a lot of condensate, especially ethane, as well as gas, which is cost effective and keeps the gas running. economy of this field. Ethane powers the petrochemical industry.
He added: “It is a difficult development, but it would not have moved forward if the issues had not been resolved.
The development of shale gas reserves outside the United States has not been particularly successful, in part because of environmental concerns – particularly in large population centers in Europe, a lack of infrastructure and difficulties in ‘access and disposal of water used in the process.
However, Jafurah is close to the Gulf Coast with relatively easy access to seawater, and is also adjacent to the world’s largest oil field, Ghawar, and its extensive energy infrastructure.
Production at Jafurah is expected to begin in 2024 and is expected to reach up to 2 billion cubic feet per day of sales gas, 418 million cubic feet per day of ethane, and approximately 630,000 barrels per day of gas liquids and condensate by 2030. Investment over this period will amount to $ 68 billion, but is expected to total over $ 100 billion in total.
Domestic employment, another key focus of the Kingdom’s Vision 2030, is also at the heart of the system. It is understood that in addition to the fields being developed in North Arabia and South Ghawar, the Jufarah project will create more than 200,000 direct and indirect jobs in the Kingdom.
The program will also integrate new technologies, notably using the industrial Internet of Things and video analysis.
The Jafurah project will not only contribute to the Kingdom’s environmental ambitions but will also support its petrochemical industry. “Its ethane and liquefied natural gas are very valuable raw materials for the Kingdom’s petrochemical industry,” said the chief of Aramco.